CESTAT Allows Drugmaker’s Appeal, Says ₹1.59-Crore Cenvat Demand Is Extinguished If Omitted From Approved Resolution Plan

The appellant was assessed a demand of ₹1,59,88,896, with interest, for allegedly availing inadmissible CENVAT credit on invoices for Methyl Triflate that it was said not to have received; a penalty of ₹40,00,000 was also imposed

The appellant challenged the Commissioner’s jurisdiction to adjudicate the matter, contending that the amount was below the revised ₹2 crore threshold, but the Tribunal did not decide that objection

During the appeal, the NCLT approved a resolution plan for Parabolic Drugs Ltd. on 12 January 2021. The company later changed its name to Akums Life Sciences Ltd., which was subsequently amalgamated into Pure and Cure Health Care Pvt. Ltd.; the appellant relied on the approved plan and the NCLT’s order concerning the amalgamation

The Tribunal relied on Section 31 of the Insolvency and Bankruptcy Code, 2016, under which an approved resolution plan binds the corporate debtor and specified stakeholders, including Central and State Governments and local authorities, in respect of statutory dues

Applying the Supreme Court’s decision in Vaibhav Goyal v. Deputy Commissioner of Income Tax, reported at 2025 (0) AIJEL-SC 740932, the Tribunal stated that statutory dues not forming part of an approved resolution plan stand extinguished and proceedings for those pre-approval dues cannot continue

The demand had originally been confirmed under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11A(4) of the Central Excise Act, 1944

The NCLT’s 12 January 2021 order approved the resolution plan and made it binding on the corporate debtor and creditors, including the Central Government in respect of statutory dues

The Tribunal applied the rule stated in Vaibhav Goyal and concluded that, because the demand concerned a period before approval and was not part of the resolution plan, it stood extinguished and could not be pursued

Although the appellant also contested the Commissioner’s pecuniary jurisdiction, the Tribunal allowed the appeal on the resolution-plan ground without deciding that objection or the underlying merits of the credit demand

It allowed the appeal on that basis; it did not decide the jurisdictional objection or the merits of the alleged inadmissible CENVAT credit